Outlook: Bearish drivers are beginning to mount this week and the prospect of a sustained bullish rally appears to be extinguished. Yesterday, reports that Libya struck a deal to appoint new leadership for the central bank sent prices to fresh intra-day lows with over 600,000 bpd of oil exports expected to return to the market. Progress toward an Israeli/Hezbollah ceasefire may have also eased geopolitical risk. Today, a Financial Times report suggests Saudi Arabia will abandon its $100 oil price target as a necessary move to increase production to recapture market share. Market conditions and lackluster demand have likely caused frustration among OPEC members while they watch barrels move between non-OPEC suppliers while they sit sidelined. OPEC intends to begin unwinding some production cuts in December and anything sooner would be a surprise to the market. Crude spreads have contracted sharply this week with the backwardation in the prompt WTI spread falling over 40 cents.
Crude
- Saudi Arabia said it is preparing to abandon its unofficial price target of $100 a barrel for crude as it prepares to increase output, according to Reuters citing the Financial Times.
- As of yesterday, 511,000 bpd of crude production in the Gulf had been shut in due to hurricane Helene. (BSEE)
- Libyan factions were reported to have reached a deal to appoint new leadership for the central bank. The deal could bring ~600,000 bpd of crude exports back online. (Reuters)
- Kazakhstan said they have no plans to curb production at its Tengiz oil field which will see production increase by 260,000 bpd in the first half of 2025. (Reuters)
- The EIA reported crude stocks fell 4.4 million barrels last week and have now fallen to 5-year lows.
- Refinery utilization rates were reported down 1.2% which is seasonal for this time period.
- Crack spreads have found support this week with mounting pressure on crude.
- August PCE will be reported Friday morning at 7:30 am CT.
- As of 8:30 am CST: Brent crude oil down $2.43 to $71.03, US dollar index down $0.010 to 100.902 while the nearby e-mini S&P 500 futures contract is up 40.25 to 5819.00.
Diesel
- The EIA reported diesel stocks fell 2.2 million barrels last week.
- 4-week average diesel demand rose 50,000 bpd to 3.844 mbpd last week.
- LTD for Oct HO is 9/30. Please be out of positions by EOD Friday 9/27.
Gasoline
- The EIA reported gasoline stocks fell 1.5 million barrels last week.
- 4-week average gasoline demand fell 26,000 bpd to 8.85 mbpd last week.
- RBOB may be more susceptible to demand destruction as another major hurricane looks to make landfall this weekend.
- LTD for Oct RBOB is 9/30. Please be out of positions by EOD Friday 9/27.
Propane
- Conway is trading at .6775 while Belvieu is trading at .6750.
- Conway Swap Q4-Q1 2025 strip indicative midpoint ~.7425.
- Conway propane is trading at 40% to WTI.
- OPIS estimates crude stocks rose 1.6 million barrels last week.
Natural Gas
- Overnight weather runs added 3 TDDs for the two-week forecast.
- 17% of Gulf gas production is offline due to Hurricane Helene.
- Reuters estimates nat gas stocks rose between 53 and 56 Bcf last week.
- LTD for Oct NG is Thursday 9/26. Please be out of positions by EOD today.
Continuous Daily HO: Diesel is testing support at its 9-day moving average today. A close below would be a bearish short-term indicator.
